Federal Court of Australia

Jadwan Pty Ltd v Rae & Partners (A Firm) [2023] FCAFC 182

ORDERS

THE COURT ORDERS THAT:

1.    The application for leave to appeal is dismissed.

2.    The applicant is to pay the first to third respondents’ costs to be assessed in a lump sum, that assessment to be undertaken by a Registrar in accordance with the procedures set out in section 4 of the Costs Practice Note (GPN-COSTS).

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

Introduction

1    This is an application for leave to appeal. At the conclusion of the hearing the Court made orders dismissing the application with costs. These are the Court’s reasons.

2    The applicant, Jadwan Pty Ltd, commenced a proceeding against the first three respondents, and the two other respondents in two separate proceedings, in the Supreme Court of Tasmania in 2003. The three proceedings were consolidated and then cross-vested to the Federal Court in 2016. The claims advanced in the consolidated proceeding were against Jadwan’s former solicitors for negligence in the conduct of their retainers causing damage.

3    Judgment was ultimately given in June 2018, dismissing Jadwan’s claims. Jadwan appealed. The appeal was dismissed in April 2020 after a hearing lasting three and a half days: Jadwan Pty Ltd v Rae & Partners (A Firm) [2020] FCAFC 62; 278 FCR 1 (Bromwich, O’Callaghan and Wheelahan JJ). The Full Court’s single set of reasons run to 570 paragraphs over 178 pages in the authorised report. On any view, the appeal was substantial and complex. The orders on appeal included that Jadwan pay the respondents’ costs of appeal to be assessed on a lump sum basis, and that a Registrar of the Court determine the amount of such costs.

4    After the first three respondents had filed a bill of costs and Jadwan had filed a response thereto, in August 2021 a Registrar of the Court determined their lump sum costs of the appeal in the amount of $104,541.57. The costs of the other two respondents were dealt with separately. They played no role in the present proceeding, with the result that it is convenient to refer to the first to third respondents as simply the respondents.

5    Jadwan then filed an interlocutory application seeking the review of the Registrar’s costs determination by a judge of the Court under s 35A of the Federal Court of Australia Act 1976 (Cth). Such a review is as of right and is conducted as a de novo hearing without the need to find any error by the Registrar: Bechara v Bates [2021] FCAFC 34; 286 FCR 166 at [17].

6    On 4 October 2022, the primary judge delivered judgment on the review application: Jadwan Pty Ltd v Rae & Partners (A Firm) (No 7) [2022] FCA 1174. The orders made were as follows:

1.     Costs be awarded to the first, second and third respondents in a lump sum in the amount of $119,102.63.

2.     The appellant pay to the first, second and third respondents costs of $119,102.63.

7    Jadwan rightly accepts that it requires leave to appeal against such a costs determination: Caratti v Commissioner of the Australian Federal Police [2021] FCA 1067 at [11]-[12] per Colvin J and Harvard Nominees Pty Ltd v Dimension Agriculture Pty Ltd (in liq) [2023] FCAFC 140 at [13] per Colvin, Stewart and Feutrill JJ.

8    In an application for leave to appeal, an applicant is required to demonstrate that the decision in respect of which leave to appeal is sought is “attended with sufficient doubt to warrant its being reconsidered” and that “substantial injustice would result if leave were refused, supposing the decision to be wrong”: Décor Corporation Pty Ltd v Dart Industries Inc [1991] FCA 844; 33 FCR 397 at 398.

The reasons of the primary judge

9    In a manner that is not criticised by Jadwan, the primary judge identified the relevant principles applicable to a lump sum costs determination to include the following:

(1)    The purpose of the lump sum costs provisions is the avoidance of the expense, delay and aggravation involved in protracted litigation arising out of taxation (at [11] citing Innes v AAL Aviation Ltd (No 2) [2018] FCAFC 130 at [12]).

(2)    The costs fixed should be proportionate to the nature, including the complexity, of the case (at [11] citing Innes at [17]).

(3)    In assessing quantum, the court is entitled to take into account the evidence that is before it, its own observations of the proceedings and the judge’s own assessment experience (at [11] citing Innes at [18]).

(4)    Of its nature, determination of a gross sum is not the result of a process of taxation or assessment of costs (at [12] citing Harrison v Schipp [2002] NSWCA 213; 54 NSWLR 738 at [22]).

(5)    The gross sum can only be fixed broadly having regard to the information before the court, which involves applying a much broader brush than would be applied on taxation (at [12] citing Harrison at [22]).

(6)    The approach taken to estimate costs must be logical, fair and reasonable (at [12] citing Harrison at [22]).

(7)    Although it is the usual practice of the court when making a lump sum costs order to apply a discount to the amount that the party was liable to pay to its lawyers, that does not mean that the court must apply a percentage discount to the sum sought. Rather, the court must be astute not to cause an injustice to the successful party by applying an arbitrary “failsafe” discount on the costs estimate. Thus, if the court can be confident that there is little risk that the sum includes costs that might be disallowed on assessment the case for a discount is seriously undermined (at [13] citing Hancock v Rinehart (Lump sum costs) [2015] NSWSC 1640 at [57]).

10    His Honour dealt first with a submission on behalf of Jadwan that since none of the solicitors in respect of whom fees were claimed by the respondents was on the Register of Practitioners kept by the High Court of Australia in accordance with s 55C of the Judiciary Act 1903 (Cth), none of the solicitors’ fees should be awarded. On the basis that solicitors can claim fees for work done by persons engaged by them who are not duly certified legal practitioners, and on the basis that the solicitors could be considered to be such persons for the purposes of costs recovery, the primary judge reduced the amount claimed in respect of solicitors’ fees by 63%. His Honour thus determined the recoverable solicitors’ fees to be $4,402.63. (At [22], [27]-[37] and [40].)

11    In respect of counsel’s fees, the primary judge concluded that the amounts sought to be recovered were logical, fair and reasonable. His Honour expressed the view that the daily and hourly rates charged by senior and junior counsel were, in his experience, at the lower end of the fees that are charged by commercial barristers practising in the area, especially in a case as complex as the appeal in question. His Honour considered the nature of the allegations made against the respondents in the litigation, the complexity of the legal and factual issues, the length of the hearing of the appeal, the vast body of material and the potential damages at stake from which he concluded that the total counsel fees of $114,700 is a relatively modest sum. His Honour thus determined that counsels’ fees should be recovered in full because they amount to a sum that is fair and reasonable. (At [38]-[39].)

The prospective grounds of appeal

12    The first prospective ground of appeal asserts that the primary judge erred by failing to seek production of any costs agreements or retainer agreements to ensure that the respondents had a liability to pay their legal representatives, or to ensure that the costs being claimed did not exceed any amount that the respondents were liable to pay their legal representatives.

13    That ground has no prospects because there is no such requirement in a lump sum costs determination. To the contrary, the Court’s Costs Practice Note (GPN-COSTS) sets out a procedure for the determination of lump sum costs. That procedure requires a costs summary that verifies the matters set out in Part A of Annexure A (GPN-COSTS at [4.10]). That verification includes the requirement for a statement on oath that the costs applicant is not claiming more than the costs applicant is liable to pay for costs and disbursements. Such a sworn verification by the respondents’ solicitor accompanied the respondents’ bill of costs in the present case. His Honour was entitled to be satisfied with that verification.

14    The second and third prospective grounds of appeal cover overlapping ground. They assert that the primary judge applied the wrong test to the costs claimed, approaching the matter as though costs had been awarded on the indemnity basis rather than on the ordinary basis, particularly in respect of counsels’ fees. They also assert that the respondents have the onus of proving that each item of work was done, that it was done in a reasonable manner and that it was reasonable to do the work in the first place, whereas the primary judge in effect reversed the onus by requiring Jadwan to establish that the fees claimed were unreasonable.

15    Those grounds also have no prospects. As indicated in the summary of the primary judge’s reasons above, his Honour approached the determination of the lump sum costs in an entirely orthodox way in accordance with the authorities. There was no requirement to consider the reasonableness of each item of work, but rather to approach the matter by way of a high-level assessment of whether the costs were fair and reasonable. There was no reversing of the onus.

16    The fourth prospective ground of appeal asserts that the primary judge failed to consider adequately or at all “the expert evidence from Costs Consultant Lydia Fogl despite conceding that he is not an expert in the area of costs assessment or the taxation of costs or in giving estimates of costs.” The report referred to was not submitted as expert evidence, but rather as Jadwan’s “costs response” in the lump sum assessment process.

17    The primary judge recorded in his reasons that although no attempt had been made before him to explain the relevance of Ms Fogl’s report to the fixing of a lump sum amount, or why any of the amounts identified in it was said to be unfair or unreasonable, he reviewed the document and did not accept that any of the items identified in it would be disallowed on a taxation (at [23]). It is thus as plain as day that his Honour did consider Ms Fogl’s report and the contention to the contrary lacks any foundation.

18    Jadwan’s identification in the transcript of self-deprecating references by the primary judge to his lack of experience or expertise in the assessment of costs also goes nowhere. It is Jadwan that sought the review of the lump-sum costs determination by the Registrar, someone experienced in costs assessments and determinations, by a judge of the Court who, typically, would not have such experience or expertise. It hardly lies in Jadwan’s mouth to then complain about that fact. But in any event, it would be necessary in any appeal to show error by the primary judge – his expertise or experience would be entirely irrelevant.

19    The fifth prospective ground of appeal asserts that the primary judge failed to consider adequately or at all the duplication of work and charges between the lawyers and counsel acting for the respondents. That ground also has no prospects. Because the process was not an assessment as on taxation, there was no requirement to identify each item of work by each lawyer and to then consider whether there was duplication. A broad-brush assessment of what was fair and reasonable is what was required, and that is what was done.

20    The sixth prospective ground of appeal asserts that the primary judge misapplied and inconsistently applied the scale of fees of the Court and the National Guide to Counsels’ Fees by referring to and applying the wrong version of the scale in respect of the instructing solicitors and not applying the scale at all in respect of counsel. GPN-COSTS (at [7.4]) identifies the National Guide to Counsels’ Fees as being published as general information to assist parties in relation to costs. It is also provided that an applicant’s “costs summary” should include information on whether the amounts claimed relevantly fall within or outside the National Guide. There is, however, no requirement on a lump sum determination that the costs that are claimed are within the Guide which is, after all just that, ie a guide. There is no error in the way in which the primary judge approached the determination with reference to the factors that he identified.

21    The seventh prospective ground of appeal was expressly not pressed.

Conclusion

22    The result of the above analysis is that none of the prospective grounds of appeal has any merit.

23    Further, it is not established that the refusal of leave to appeal would occasion substantial injustice to Jadwan, even assuming there was error in the primary judgment. Indeed, in view of the scale and complexity of the appeal in respect of which the costs were awarded and then determined, the sum determined by the primary judge is not obviously manifestly excessive or beyond the scope of what appears fair and reasonable. So, even if there was a redetermination, it is unlikely that any new sum that was arrived at would bring any significant saving to Jadwan.

24    Indeed, the application for leave to appeal and the prospective appeal are entirely disproportionate to what is at stake between the parties. The application should never have been brought as it does not reflect an approach to the resolution of the dispute at a cost that is proportionate to the importance and complexity of the matters in dispute. Such conduct is contrary to Jadwan’s obligation as a party to a civil proceeding before the Court as imposed by s 37N(1), read with s 37M(2)(e), of the Federal Court of Australia Act.

25    It was thus inevitable that the application for leave to appeal would be dismissed.

26    There is no reason why the costs should not follow the result. However, in an effort to avoid a repeat of the previous process, the Court made orders with regard to the determination of a lump-sum.

Associate:

Dated:    22 November 2023

SCHEDULE OF PARTIES